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Personal service arrangements exception

The exception (42 CFR 411.357(d)(1)) for personal service arrangements covers remuneration from a DHS entity under a single arrangement or multiple arrangements with a physician, an immediate family member of the physician or a group practice. The exception also applies to specific physician services furnished to a nonprofit blood center.

The following conditions must be met to comply with the personal services arrangements exception:
  • Each personal services arrangement must be in writing, signed by the parties, specifying the services covered by the arrangement;  
  • The arrangement(s) covers all of the services to be furnished by the physician (or an immediate family member of the physician) to the entity. This requirement will be met if all separate arrangements between the entity and the physician and the entity and any family members incorporate each other by reference or if they cross-reference a master list of contracts maintained and updated centrally and is available for review upon request. The master list should be maintained in a manner that preserves the historical record of contracts;
  • The aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangements;
  • The term of each arrangement is for at least one year. To meet this requirement, if an arrangement is terminated during the term with or without cause, the parties may not enter into the same or substantially the same arrangement during the first year of the original term of the arrangement;
  • The compensation to be paid over the term of each arrangement is set in advance, does not exceed fair market value and, except in the case of a physician incentive plan, is not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties;
  • The services to be furnished under each arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates any state or federal law; and
  • A holdover personal service arrangement for up to six months following the expiration of an agreement of at least one year that met the conditions listed above satisfies this exception provided that the holdover personal services arrangement is on the same terms and conditions as the immediately preceding agreement.
For purposes of this rule, a physician or family member can "furnish'' services through employees whom they have hired to perform the services, through a wholly owned entity, or through locum tenens physicians, except that the regular physician need not be a member of a group practice.
 
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